BrewDog & private equity: has the brand sold out?

BrewDog is no stranger to controversy. The business has built its brand off the back of its punk attitude. It’s shown outright hostility to big brewing and bland beers. Its brand has won fans and helped it attract thousands of small shareholders via its Equity for Punks crowdfunding drives. It’s also stuck two fingers at the trade and regulators. This has also worked and underpinned BrewDog’s phenomenal growth. So what does this week’s decision to accept private equity investment mean for the brand?

The details

The deal sees BrewDog accepting a £213 million investment from US private firm TSG Consumer Partners. TSG will take a 22.3% stake in the business. The investment is split into three components. £100m of new capital will be issued, £100m will be shared between the founders and £13m will go to some of the early Equity for Punk investors. It’s obviously a fantastic payday for the founders. And it’s probably a decent return for the small shareholders, even if they can only sell a limited amount of shares. But what about the impact on BrewDog’s cherished, punk brand personality?

The brand impact

BrewDog’s attitude has been key to its success. It’s pioneering use of crowdfunding visa Equity for Punks also helped attracted significant investment which has fuelled the business’ rapid growth. They’ve also stated repeatedly that they’d never sell out . When Camden Town announced its acquisition by AB Inbev, BrewDog delisted their beers. So does a private equity investment count as selling out?

The answer depends on how the founders use the investment. If they can continue to grow and keep infusing teams with the BrewDog culture then there should be minimal problems. As James Watt states

“Our appeal to drinkers isn’t about scale, it’s about passion and values. It’s about living or dying by what goes in to every glass or bottle,” BrewDog CEO to the BBC.

This is a fair point and their rapid growth so far hasn’t stymied their style or their ability to attract consumers, team members and investors.

BrewDog & private equity: a Faustian pact?

But. And there is a but. Until now the founders have been in full control. The punk investors held a very small amount of shares giving the founders total control. Taking such a huge investment comes with risks. Firstly, its new partners will expect a huge return on their investment. Private equity investors aren’t small shareholders. There’ll be a real expectation of a huge payout in 5 – 10 years.

TSG will also have a view on BrewDog’s plans, it’s revenue and profit growth. The new partners may also want the business to borrow to finance further investment. This may make it harder for James Watt & Martin Dickie to operate as independently as before. The flipside of course is that they may benefit from their investors expertise.

The deal doesn’t diminish the brand. In the eyes of their fans, it reinforces what the brand is doing right. The risk comes from how the new partners may impact on the business, its culture and it’s precious brand. Only time will tell whether they’ve signed a deal with the devil.